The Opaqueness of Rocket Internet

Rocket’s holding structure features shareholdings in more than 500 far-flung companies, and its model of breakneck growth means that investors can’t rely on the standard, stable financial measures they normally use to judge a company’s value. Indeed, the numbers that investors care most about aren’t reported in Rocket’s official financial statements. Instead, they look to self-reported, unaudited estimates of Rocket’s “last portfolio value” (LPV), or the theoretical value of the stakes it holds in portfolio companies. (…)

“In the main, [Rocket’s] communication focuses on all things LPV,” wrote analysts from Jefferies in a recent note. “Disclosure is certainly not comprehensive and, one has to say, there is a promotional tone running through the prints, for sure.”

I don’t believe this will work well in direct competition with bigger companies like Amazon, Zalando, Alibaba or Uber. Because here’s the thing: A global online retailer can exert network effects in more dimensions than locally confined companies can. (besides plain scale effects which also come to fruition here) (..)

The amount of market influence [global online retailers] will exert a few years down the road can hardly be overstated.